Cleaning up a credit mess

My regular appearances on a local radio show, KNX’s “Money 101″ with Bob McCormick, tend to generate a fair amount of emails. (I’ll be back on Tuesday July 9 at 11 a.m., if you’re in LA or want to listen via itsÂ Web site.) Bob forwarded me a plea for help from a listener named Veronica, who said “Help! I have had horrible credit for over 20 years and want to clean it up to buy a house…What should I do? Are there any companies that can help me?”

I wish there were a raft of solid, reputable companies that could help you burnish your credit, but there aren’t. This is an area with a lot of fraud and false promises. That’s one of the reasons why I usually urge people at least start the process of cleaning up their credit reports themselves. If you run into a problematic creditor or collector that insists on reporting errors, you can hire an attorney familiar with fair credit and debt collection laws (www.naca.netÂ offers referrals).

You also have to make sure your finances are on a sound footing. All the credit repair in the world won’t help if you keep paying bills late or regularly max out your credit cards. Once you’re living within your means and have at least a token amount saved (one week’s pay or $1,000, whichever is less), you can start the credit repair process:

You begin by getting your three credit bureau reports fromÂ www.annualcreditreport.comÂ and challenging any serious errors or negative marks older than 7 years.
You obtain and use credit cards, never charging more than 30% of your credit limits and paying the bills in full each month
You consider getting an installment loan (a personal or auto loan) and paying it off on time.

Improvements take time, so you’d be smart to start this process at least a year in advance.

I outline the path to better credit in my book, “Your Credit Score,” which was recently published in a second edition. You can find it on Amazon or at your local library. The chapters on improving your score, coping with a credit crisis and rebuilding your credit will be the most relevant. Good luck!